An Unemployment Crisis for Older or Younger Workers?

On Tuesday the Senate Special Committee on Aging held a hearing on how to help older workers find jobs. I was one of five witnesses at the hearing.

No matter that Americans aged 55 and over are the only group that over the past decade has shown an increase in employment (8.9 million) and in labor force participation rate (5.7 percentage points). No matter that nationally, the unemployment rate, at 6.6 percent, was lowest for those 55+ in 2011, and that those older workers have experienced the smallest increase during the recession.

Why, then, did the committee decide that this is a topic that merits attention? The answer may like in the narrowly focused jurisdiction of special committees like this one, and in the imperative that committee staffers generate hearings and reports to justify their existence.

Proportionately fewer older workers (6.6 percent) were unemployed in 2011 than those aged 20 to 24 (14.6 percent) and 25 to 54 (7.9 percent). However, a larger share of older unemployed workers, 55 percent, is unemployed long-term, 27 weeks or longer. That compares with 47 percent of unemployed workers aged 25 to 54, and 35 percent of unemployed young adults ages 20 to 24.

One reason is clear. As workers rise in the labor force, and acquire experience that gives them specialized skills, they find fewer openings to match their credentials-or their expected earnings. Workers in their fifties are at their peak earnings, and there are fewer openings at these levels than entry-level positions.

The committee released a new Government Accountability Office study performed at the request of committee chairman Herb Kohl (D-WI) entitled "Many Experience Challenges Regaining Employment and Face Reduced Retirement Security."

It contains a series of recommendations including: Congress offer temporary wage and training subsidies to employers who hire those older workers who have experienced long-term unemployment; Congress compensate older workers for accepting lower-paying, full-time jobs; Congress eliminate the requirement that Medicare is the secondary payer for workers 65 and older covered by employer-provided health insurance; and Congress expand job search and training programs for older workers.

It’s important to examine unemployment among older Americans because of the aging of the workforce, which is accelerating now that the Baby Boomers are approaching retirement. On average, older workers can expect to live until their mid-80s, and dropping out of the labor force at 55 could mean 30 years of retirement. Not many have saved for 30 years of retirement. One implication is that a larger older population is supported by a smaller younger population, the essential problem going forward with Social Security.

But despite the narrow focus of the Senate Special Committee on Aging (note that the House has no such panel), the unemployment problem is not age-limited. It is general, and worrisome for all ages.

Our economy should function so that all those of any age who want to work can find jobs. Millions of Americans are looking for work, and the number in poverty, 46.2 million, is the highest since the Census Bureau began compiling poverty data 52 years ago.

While I agree with the factual findings that older workers face serious difficulties in today’s underperforming labor market, I disagree, as I testified to Chairman Kohl, that the problems facing older workers require targeted policies that treat older workers differently.

Such policies would, unhelpfully, set one generation against another. They rest on the false premise that the problems facing older workers are the result of discrimination, or other factors that work specifically against older workers and in favor of younger workers.

In fact, the problems facing older workers are not dissimilar from the problems facing all other workers, the lack of robust job growth. America needs policies that will contribute to stronger job growth broadly, policies that will benefit all.

The GAO report is distressingly vague. It offers no cost estimate for its proposals and no expected benefits, such as how much the duration of unemployment might be reduced. It is filled with anecdotes from "focus groups" and "experts" in three cities, but lacks reliable data.

Despite the implication of the Committee’s approach, unemployment is an equally great problem for young adults, if not more acute. The unemployment rate in 2011 for newly graduated men and women with bachelor degrees was 9 percent, far higher than the 4.9 percent rate such young adults experienced in 2006. The effects of the recessionhave fallen most disproportionately on them. By contrast, the unemployment rate in 2011 for age 55+ was XX percent.

The Pew Research Center has found that older Americans have benefited from appreciation of their homes, higher incomes, and lower unemployment rates. When these factors are taken into account, older Americans come out ahead of younger Americans, with 47 times the net wealth of their younger counterparts.

Older Americans who bought houses or condos have seen their home equity rise. The 2009 American Housing Survey reports that 50 percent of older Americans bought their homes before 1986, and 65 percent own their homes free of mortgages.

As well as assets, Pew reports that incomes of older Americans have risen four times as fast as incomes of younger Americans.

As the GAO report states, the problem not just for senior citizens but for all Americans is too few jobs. One reason that the employment picture is bleak is that it’s getting harder to create jobs due to government regulation.

Mr. Obama acknowledged this when, on May 10, 2012, he issued an executive order expanding Executive Order 13563, which was entitled Improving Regulation and Regulatory Review. The May 10 Executive Order asks for public input in reducing regulations, and calls on agencies to prioritize their regulatory reviews to deal with the most burdensome regulations first.

Tougher regulations lead employers to locate elsewhere. Friendlier regulations draw them back home.

Already, it is easier to employ workers overseas than in the United States. The Wall Street Journal reported on April 27 that three-quarters of new jobs created by U.S. multinationals were offshore over the past two years.

The larger reality is that this administration’s policies have failed across the board and resulted in a serious deficit of job opportunities for all workers. The problem will not be solved by special policies that favor one group over another.

The GAO report advocates shifting some jobs to older workers but at the expense of younger workers. This sort of redistributionist policy is both unfair and unwise. It amounts to intergenerational class warfare. What we need are policies that broadly create more job opportunities for all.

This piece originally appeared in RealClearMarkets

This piece originally appeared in RealClearMarkets